YM (a child ) v Gloucestershire Hospitals NHS Foundation Trust & Anor

For an order for periodical payments, the court must be satisfied that continuity of payment is reasonably secure. Absolute security is not required. The requirement may be met where binding arrangements make the NHS Litigation Authority the effective source of payment, give the claimant a direct right of enforcement against it, and ensure that it is funded to meet the liability. If the NHS Litigation Authority is the effective source, statutory security also follows from its status as a designated health service body and Special Health Authority. The arrangements were suitable for adaptation in similar cases.

Two settled clinical negligence claims involving child or protected claimants required approval under CPR Part 21.10 because the settlements included periodical payments for future pecuniary loss. One defendant was an NHS Foundation trust; the other was an NHS trust seeking Foundation trust status. The court adjourned the approval hearings and joined the Secretary of State because it was uncertain whether continuity of payment was reasonably secure, particularly given the different statutory treatment of liabilities on the failure or dissolution of the two types of trust.

Following further evidence and agreements involving the defendant trusts, the NHS Litigation Authority and the Secretary of State, the central issue was whether those arrangements satisfied the statutory security requirement.

1. Outcome. The settlements were approved and orders for periodical payments were made in both claims. The court was satisfied that continuity of payment was reasonably secure.
2. Section 2(3) of the Damages Act 1996 imposes a condition precedent to an order for periodical payments. The court must be satisfied that continuity is reasonably secure, but absolute security is not required.
3. The statutory regimes differ. Under section 1(1) of the National Health Service Residual Liabilities Act 1996, the Secretary of State has a mandatory duty to secure the treatment of liabilities when an NHS trust or specified health body ceases to exist. The Health and Social Care (Community Health and Standards) Act 2003 does not impose an equivalent duty in relation to an NHS Foundation trust. Sections 25(3) and 26(1) instead confer a discretion to order a transfer of liabilities.
4. The arrangements resolved that difficulty. The NHS Litigation Authority agreed to be named as responsible for making the payments. Agreements secured funding if a trust left the Clinical Negligence Scheme for Trusts, and the Secretary of State agreed to fund the NHS Litigation Authority if a Foundation trust became insolvent. The orders also created a collateral contractual right enabling direct enforcement against the NHS Litigation Authority.
5. Because the NHS Litigation Authority was the effective source of payment, section 2(4)(c) of the Damages Act 1996 deemed continuity reasonably secure. Its status as a Special Health Authority provided additional protection under section 1(1) of the 1996 Act. A model order was appended for use in similar cases.